This case involves defamation claims brought by Kevin Padrick of Obisidian Finance Group against Crystal Cox. Obsidian (Padrick) was the Chapter 11 Trustee for Summit Accomodators, and Cox wrote a series of posts accusing Padrick and Obsidian of fraud, corruption, money-laundering, and other improper activities. Obsidian and Padrick sued. Cox, representing herself, raised some First Amendment defenses. The district judge found that a slew of the posts were figurative and hyperbolic, but allowed the case to move forward on the basis of a single post. With respect to this post, the district judge instructed the jury that Cox’s “intent or purpose” in publishing the statement and whether she knew that the statements were true or false were not elements of the claim. The case went to trial. At trial, Cox lost: $1.5 million for Padrick and $1 million for Obsidian). Cox appealed. (Check out this story by David Carr for some interesting background: “When Truth Survives Free Speech“.)

On appeal, the 9th Circuit reverses.

The framework for the level of fault necessary in a defamation suit was set by New York Times v. Sullivan and its progeny. The level of fault varies depending on private or public status of the plaintiff. While NYT v. Sullivan involved a public official and required a showing of actual malice, in Gertz v. Robert Welch the Court held that only negligence is required where the plaintiff is a private figure. Both of these cases impose some minimal fault requirement, and involved media defendants. The key question here, was whether Cox, as a blogger, was entitled to the benefit of these rules. The court says yes:

The protections of the First Amendment do not turn on whether the defendant was a trained journalist, formally affiliated with traditional news entities, engaged in conflict-of-interest disclosure, went beyond just assembling others’ writings, or tried to get both sides of the story. As the Supreme Court has accurately warned, a First Amendment distinction between the institutional press and other speakers is unworkable.

The court says that “the public-figure status of a plaintiff and the public importance of the statement at issue – not the identity of the speaker” are what matter for First Amendment purposes. Padrick and Obsidian also argued that the Gertz negligence standard was not implicated because the speech here, in contrast to the speech in Gertz, was not a matter of public concern. The court says that the Supreme Court has not addressed this precise issue and punts on it. Nevertheless, the court says Cox gets the benefit of this standard because her statement is a matter of public concern:

Public allegations that someone is involved in crime generally are speech on a matter if public concern. . . . This court has held that even consumer complaints of non-criminal conduct by a business an constitute matters of public concern.

Thus, even assuming that the Gertz standard only applies to public concern speech, that standard is satisfied, and the district court’s instruction to the contrary is erroneous. The court also adds that the district court should have instructed the jury that presumed damages are not proper unless it finds that Cox acted with “actual malice.”

The court does reject Cox’s argument that Padrick and Obsidian were “tantamount to public officials”. Obsidian is therefore not required to satisfy the New York Times v. Sullivan standard.

Padrick and Obsidian cross-appealed, arguing that the district court improperly found that a slew of statements were hyperbole and opinion. The court lays out a three part test that looks to the tenor of the statement, whether the speaker used hyperbolic language, and whether the statement is capable of being true or false. Here, the statements were posted on a “sucks” site and were in the nature of a stream of consciousness. Cox used “extreme language,” negating the impression of objective facts. Finally, given the nature of the website and the tenor of the language, the 9th Circuit says the district court was correct in its conclusion that the bulk of the statements were hyperbolic/figurative and not capable of being proven true or false.

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This is a great ruling for online speakers. As the court notes, numerous other circuits have all come to the conclusion that the level of First Amendment protection does not turn on the institutional status (or lack thereof) of speakers. Score one for the pajama-clad blogger community! As the court notes, in numerous other contexts (e.g., campaign finance, FOIA), courts decline to make distinctions between corporate media defendants and individuals who gather or disseminate information, and it’s nice to see a ruling where it matters a lot: protection against defamation lawsuits. Interestingly, Cox had engaged in conduct that can be reasonably described as unprofessional (“Cox apparently has a history of making similar allegations and seeking payoffs in exchange for retraction”), but to the court this was not decisive. It will be interesting to see what (if anything) happens on re-trial. While Obsidian may be able to prove negligence on Cox’s part, it may still have difficulty getting a large damage award given the court’s statement on presumed damages.

The ruling that the statements are a matter of public concern is equally important. (It’s worth noting that this is one limitation of the court’s decision. A blogger that is addressing a topic that is not a matter of public concern or talking about a public figure does not necessarily get the benefit of the Gertz standard.) It’s not ground-breaking per se, but a nice reaffirmation that an allegation of misuse of funds or improper conduct in the public arena is generally a matter of public concern. Contrast that with a recent public employee speech case that Eric and I blogged about, where the court said that an employee’s qualm with her employer’s decision to save money and not send officers to a colleague’s funeral, was not a matter of public concern. The court also cites to consumer complaints about business being a matter of public concern which is nice for reviewers and review sites.

The affirmance of the district court’s conclusion as to hyperbolic statements is also good. Interestingly, here the unprofessional nature of the site (and writing) ends up helping the blogger-defendant, but the court has no qualms about saying that extreme writing on a sucks site is more likely to be opinion than fact. When coupled with the first two rulings, your average ranting blogger (or person on Twitter for that matter) gets a nice layer or First Amendment protection when writing about corporate abuse or similar matters that are of public concern.